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BMI View: Production of crude and natural gas will grow over the next decadedueto strong project pipeline and continued government support. However, the country will produce below its potentialduetoa history of strong environmental opposition and a highly competitive regionalmarket, diminishing the attractiveness ofthecountry's oil and gas sector amid the industry-wide downturn.

Headline Forecasts (Peru 2014-2020)

2014e

2015e

2016f

2017f

2018f

2019f

2020f

e/f = BMI estimate/forecast. Source: Minem, BMI

Crude, NGPL & other liquids prod, 000b/d

175.6

151.9

135.8

132.2

132.1

133.5

136.9

Refined products production, 000b/d

194.0

204.5

204.5

204.5

204.5

214.7

223.3

Refined products consumption & ethanol, 000b/d

231.4

254.0

270.4

297.3

339.7

408.2

519.6

Dry natural gas production, bcm

12.9

12.5

12.9

13.3

13.8

14.4

14.9

Dry natural gas consumption, bcm

6.6

6.7

6.9

7.2

7.5

8.1

8.4

Brent, USD/bbl

99.50

53.60

45.50

57.00

62.00

65.00

71.00

Key developments in the Peruvian oil and gas sector:

Peru will remain among the region's brightest economic growth stories through 2017, as production growth in the mining sector and strengthening public investment lead accelerating economic activity. In recent quarters, growth has accelerated largely due to the beginning of production at Las Bambas, a massive copper mine set to rank among the world's three largest when it reaches full production capacity later this year.

The election of Pedro Pablo Kuczynski in June formally began an administration that will solidify Peru's business-friendly reputation. Kuczynski has appointed a cabinet of technocrats whose commitment to orthodox macroeconomic policy will support policy continuity and underpin an agenda that aims to boost investment into the mining-driven economy.

However, investment into the hydrocarbons sector will largely go to natural gas given Peru's position in the LNG export market and rising domestic demand. Crude production will suffer continued declines as investment into the sector wanes on the back of sustained commodity price weakness.

We expect the completion of the Southern Gas Pipeline (GSP) will be delayed to 2019 following the exit of its constructor, Odebrecht, the owner of a 55% stake in the project. The GSP - which is currently 34% completed - is expected to supply feedstock to two thermal power plants currently under construction in Ilo and Mollendo.

On May 6, Repsol and Petroperu agreed to increase fuel prices. Increases varied depending on the octane of the fuel, with prices at the pump rising from 2.6 to 4.7% in total.

Modernisation of Petroperu's 62,000b/d Talara refinery is progressing slightly ahead of schedule, supporting our current downstream capacity forecast. As of May 4, the project was 37% completed. In the same month, the company issued a tender for underwater lines and multibuoys. Eight groups submitted consultations as of May 31, including Cadape, Cobra Instalaciones y Servicios, Cosapi, JJC-Schrader Camargo, M y C Parinas, Mota-Engil.

The full commissioning of the second 4.5mntp Train of the Sabine Pass LNG export facility in the US in October will threaten Peru's LNG market share. Though this will compete with Peruvian exports, we believe the country will remain a dominant player in the region due to a lower variable cost of production compared to US supplies.

The Peru Oil & Gas Report has been researched at source and features BMI Research's independent forecasts for Peru including major indicators for oil, gas and LNG, covering all major indicators including reserves, production, consumption, refining capacity, prices, export volumes and values. The report includes full analysis of industry trends and prospects, national and multinational companies and changes in the regulatory environment.

BMI’s Risk Reward Indices provide investors (independents, NOCs, IOCs, oil services companies) looking for opportunities in the region with a clear country-comparative assessment of the upstream and downstream market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.

Market Overview

A profile of the upstream and downstream sectors, including analysis of reserves, output, consumption and trade of energy products; overview of the industry landscape and key players; assessment of the business operating environment and the latest regulatory developments.

Competitive landscape

Comparative company analyses by USD sales, % share of total sales, number of employees, year established, ownership structure, oil production (‘000b/d), gas production (bcm), downstream capacity (‘000b/d) and % market share.

Company Profiles*

Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate Company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.

Regional Overview

Regional perspective on size and value of the industry. Plus comparative rankings by production, refining, imports and exports of oil, gas and LNG.

Global Oil Market & Oil Products Outlook

Based on our country coverage of over 99% of global oil and gas production and consumption, BMI provides demand, supply and price forecasts to end-2024 for oil, gas and oil products.

Sources

The Oil & gas Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.

*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.